Blog Visitors' CommentsCondo Search's comment..
I just drop by to say "thank you" for your excellent blog, and safe me from committing at a high price and wrong time buying. It helps me a small property hunter(with hard earning money) and others(i believed)a better inform. Thank you again...

Young Buyer's comment...
I've just graduated and started working, and I hope to own a residential property in Singapore after 2010/2011. So I'm starting to do my Singapore property research now. I have never come across such a comprehensive coverage on the Singapore property market, and I thank you for enlightening readers like me who want to know more :) Keep up the good work!

Young Expat's comment...
i am an overseas expat who moved to singapore a year ago and started looking out recently for property to buy as rentals started to rise all around me..i was advised to follow ur forum and since then have been impressed with all the wonderful tips exchanged in this portal..thanks to all the contributors.(Smart Buyer, the blogger here, would like to say many thanks to all these unsung heroes too)

Red's comment...
I think your reply give a rational explanation on my question. You are indeed a smart buyer and very knowledgeable.

Kate's comment...
This is a great blog filled with latest news, historical insights and good opinions that gives direction. Not the sitting on the fence type of 'pc' opinions. I love this blog. Please keep up the good work! You are really doing Singaporeans a big favour! Thank you!! I will keep on reading.

Phantasia's comment ...
Hi smart buyer,
Just wanna say thanks for your response to my query earlier in another post. And also for the very informative blog! Have learnt much from your postings! Thanks for sharing.

Smart Buyers, 10 reasons to waitFear that property price will go up forever? Here are 10 reasons to consider before you make that big commitment.......Posted by Smart Buyer(This post contains the 10 reasons that Smart Buyer first wrote for himself in mid 2007 when the property market was in a runaway euphoria, which he subsequently posted on this blog for all property buyers to consider. The arguments are supported by official data and illustrated with property supply and property price index graphs.)

Bad investments are made in Good Times
Looking at the subprime problem, it is definitely a bad news that will take time to filter down. The falling US$ is another problem that will hit the US economy. China and HK property and share mkt are 2 big bubbles.. Beware !!...Posted by km(This post contains km's first-person account of the 1998's property market crash and all the troubles that came with it - soaring mortgage rate, vacant properties with no available tenants, banks pressing for top-ups as property valuation dropped, ... his story has a happy ending of course. He'd share with you openly the lessons learnt.)

Solvency Worries STALK CREDIT-DERIVATIVES MARKET. They are now talking of SOLVENCY, not just LIQUIDITY issue .......it's really quite serious now....Posted by AnonymousHaving a house which has a big loan is a liability at this global trouble time.So far the market is still moving down slow due to the reason that many of the countries are injecting funds to buy part of the share of the banking market. The negative news continues to rise. The money is better leave in CPF and local banks to grow interests....Posted by Anonymous

During the 1995 -1998 period, the same scenerio arise..Many people cant get the HDB flat. There was the ballot system and it is just like "ti-kam", 1 out of 8 can get to buy. Due to this flocked system, many people, including those who are not so keen buyer also join the Q, paying $10 as a ballot fee, when they get balloted, then ......Posted by Anonymous

This market is definitely driven by greed and liquidity.I have never seen anything like it in my lifetime. Property prices goes up as fast a the stock market. This market is definitely driven by greed and liquidity in the asian market. What goes up must come down!...Posted by rob-502

Your Property Investment Decides Your Financial SuccessYour Property Investment may be the sole determinant of your financial success in life. One wrong move,......Posted by Smart Buyer (This post contains Smart Buyer's first-person account of the 1990's boom and bust, and how investment opportunities presented themselves in the market crash of 1998 and 2006.)

Saturday, July 26, 2008

RPI (Resale Price Index) Graph for HDB resale flats from 1990-2008

Note that the highest RPI achieved to date is 136.9 in 1996, 4th quarter; due largely to the spillover speculation from the private property market. Demand was largely for bigger HDB flats like executive flats then. This in turn caused many Singaporeans to apply for upgrading to larger HDB flats with the belief that they'd make more money. This resulted in over-supply of new HDB flats in the subsequent years.With the outbreak of the Asian Financial Crisis in 1997, coupled by the gross over-supply; HDB resale flats plunged in 1997-1998 for the first time.

Table of RPI for HDB resale flats from 1990-2008

HDB RPI (Resale Price Index) 1990-2008

1Q

2Q

3Q

4Q

1990

33.6

33.8

(0.6% )

34.6

(2.4% )

34.1

(-1.4%)

1991

34.5

(1.2% )

35.2

(2.0% )

34.9

(-0.9% )

34.7

(-0.6%)

1992

35.7

(2.9%)

37.9

(6.2% )

38.7

(2.1%)

39.6

(2.3% )

1993

41.8

(5.6% )

54.8

(31.1% )

65.9

(20.3%)

67.8

(2.9% )

1994

69.7

(2.8% )

71.5

(2.6% )

75.5

(5.6% )

75.8

(0.4% )

1995

79.2

(4.5% )

88.4

(11.6%)

93.6

(5.9% )

101.9

(8.9%)

1996

111.4

(9.3% )

125.7

(12.8% )

133.3

(6.0%)

136.9

(2.7% )

1997

136.3

(-0.4%)

134.9

(-1.0%)

129.4

(-4.1%)

121.7

(-6.0%)

1998

113.0

(-7.1%)

108.3

(-4.2%)

103.6

(-4.3% )

100.0

(-3.5%)

1999

98.5

(-1.5%)

99.9

(1.4%)

108.0

(8.1%)

110.4

(2.2%)

2000

111.1

(0.6%)

109.7

(-1.3% )

107.3

(-2.2%)

104.9

(-2.2%)

2001

101.3

(-3.4% )

99.7

(-1.6%)

97.7

(-2.0%)

96.3

(-1.4%)

2002

95.5

(-0.8%)

95.7

(0.2%)

96.7

(1.0%)

96.7

(0.0%)

2003

98.2

(1.6%)

100.3

(2.1%)

38.7

(2.1%)

39.6

(2.3% )

2004

104.1

(0.2%)

105.4

(1.2% )

105.5

(0.1% )

106.6

(1.0% )

2005

106.7

(0.1%)

101.6

(-4.8% )

101.2

(-0.4%)

101.6

(0.4%)

2006

101.8

(0.2%)

102.8

(1.0%)

102.6

(-0.2% )

103.6

(1.0%)

2007

104.9

(1.3% )

108.0

(3.0% )

108.0

(3.0% )

121.7

(5.7% )

2008

126.2

(3.7% )

(-0.4%)

131.7

(4.4% )

?

?

In comparison, the HDB resale boom in the 2008 is better supported by fundamental factors. Policies such as sublet of whole HDB flats, singles ownership scheme and more generous government subsidies all go towards supporting higher prices for HDB resale flats. At the same time, genuine demand for HDB flats has also been increased by the recent influx of foreign workers and the bulk of new citizens. On top of this, Minister for National Development Mah Bow Tan has repeatedly said that HDB would build only on "orders" (BTO = Build to Order), so the oversupply condition that happened in the 90s is quite unlikely to repeat this time round. While HDB flat owners may welcome this assurance, HDB home-buyers are getting increasingly stressed up by the soaring resale prices. One wonders how the government will ultimately balance the interests of the two parties. Meanwhile, it seems HDB resale price is set to rise further and possibly surpassing its 1996's peak.

24
comments:

PS I am a house seeker now.. the resale prices are driving me nuts.. :( I have read several posts that seem to sugg that resale market is going down soon (since private prop is going down). Should I wait therefore?

Dear Elaine,I wish I could bring you some comfort :( but my best guess is HDB resale price is still on its upward climb as reported in the article you referred to published by Straits Times. Judging from the last HDB resale data report, the HDB resale market still looks very strong in terms of price increase, transaction volume and rental rate. Based on my observation, any sign of softness in a property segment will first be reflected in a substantial drop in sale volume and rental rate. For HDB resale flats, sales have increased some 22% and rents continue to climb by 10% or more.

Though there's no such thing as property price increasing forever, I'm afraid that the peak has yet to be arrived at for HDB resale market.

The current peak for HDB resale flats is still lower than it's 1996's peak but the "real" value of HDB flats have in fact been enhanced by several HDB policies implemented after 1996. (Policies include sublet of whole HDB flats, singles ownership scheme, more generious govt subsidies which all go towards supporting higher prices for HDB resale flats.) At the same time, genuine demand for HDB resale flats has also been increased by PRs and new citizens. On top of this, Minister Mah has said that HDB would build only on "orders" (BTO = Build to Order), so the oversupply condition that happened in the 90s is quite unlikely to repeat this time round.

Personally, I think prices for HDB resale flats are likely to rise further, possibly superseding its 1996's peak, before stabilising.

A substantial fall in prices for HDB resale flats over the next few years is likely only if Singapore goes into a deep recession.

If buying directly from HDB is an option open to you, do consider that first and foremost.

Thanks for your advice!! Hope you don't mind I discuss this with you in your blog. Please correct me if any of my thoughts below are misconceptions:

My husband to be and myself belong to the category where we can't qualify for a CPF housing grant or a new flat. So the only options avail to us are either a condo or resale.

Being first time house owners, we didn't think it was very prudent to buy a condo (and be bogged down with a huge loan). So its a resale flat for us.

However, we are not cash-rich either. And being risk-adverse, we didn't think it was wise to take up more loans than what we can afford, not with the bearish economic outlook for Singapore. The private housing market has also confirmed to have gone soft (this may lead to more buyers wanting to buy a condo instead?). Coupled with the softening of the global economy, I am hoping this will take some of the steam off the resale market. At least, take some steam off the COV component! :D

The article did point that HDB resale market is going strong, but it does not show any new statistics. In fact, it seems to suggest that the market is losing some steam even with that headline. Perhaps I was just trying too hard to read between the lines!

Dear Elaine,The financial prudence you and your husband-to-be are exercising is commendable. Many young and successful couples I know of aren't this prudent. It's only when their debts start piling that they realise that they are in a mess.

Back to your question. The private property market has gone soft only in terms of sale volume but prices are still steep. I believe the steep pricing has driven more first time home buyers, who otherwise would have have private property, to the HDB resale market. Until and unless private property price falls substantially; this trend, in my opinion, is likely to continue.

A logical outcome I see would be for the price gap between HDB resale flats and private property to narrow to a more reasonable level (~20%), say by next year, as I've explained in this post:http://smartpropertybuyer.blogspot.com/2008/05/making-forecast-for-singapore-property.html

Going forward, I'd expect the price increase in the HDB resale market to moderate somewhat for the rest of this year. It's just my best guess.

Dear Red,According to HDB latest flash statistics, RPI is 137.4, which is above the 96-peak of 136.9. Based on the statistics, we can conclude quite objectively that current HDB resale price is higher than in 1996.

I guess you're asking me on the ground level, do I feel that current HDB resale price is higher than 96-peak? The answer is YES.

Frankly, I don't remember HDB resale flats getting this hot ever.

The 96-peak was driven by a lot of HDB upgraders who then believed that you'd make more money with bigger HDB flats. It was "speculation" of some sort. The current peak is driven largely by new citizens and permanent residents. I also see a continuous "demand downgrading" (from private property to HDB, from prime HDB to outskirt HDB, from 5-rm HDB to 4-rm to 3-rm...) in the current market driven by real housing needs and high prices, quite unlike that in the 96 peak which saw "demand upgrading" driven by feverish speculation of ever rising property price.

In short, I think the current HDB resale price is more sustainable than that in 96. The supply crunch will ease only as more new HDB flats come on stream in 2-3 years time, or a severe recession which simply kills demand.

Thanks. I think your reply give a rational explanation on my question. You are indeed a smart buyer and very knowledgeable.

With the start of this week, the financial market is getting a lot of potential buyers and not forgetting the sellers all worked up. Everyone is scream for the mirrorball. This is well understood as it is just not easy when it involve huge sums of money.

I wish I could give you a "yes" or "no", but I can't. It's really anybody's guess how bad this recession is going to be. Personally, I do not see HDB price falling significantly but then again if retrenchment becomes really bad, who can imagine what's going to happen. Just make sure you do not over-commit at an uncertain like that.

I feel that since last 1 month time, the asking COV for resale HDB flats has came down to a moderate level - say around 10K-15K for most of the 5 room flats. Few months back it was above 25-30K. So i feel a deal with lover COV (though valuation price has not reduced) will be a less risky deal. Do you agree with this? I'm currently paying a high rental and the more i wait to buy a resalt flat is costing me more (by considering the rental amount). So if I got a deal with a valuation of 350K and a COV of 10K for an 5I room flat (low floor, corner unit and decently renovated) near a MRT (NE line) and other amenities, will it be a good deal to proceed with? Please let me know your thoughts. Thanks in advance for your help.

Dear JK,My answer to you is the same I've given to the others in similar shoes:

I wish I could give you a "yes" or "no", but I can't. It's really anybody's guess how bad this recession is going to be. Personally, I do not see HDB price falling significantly because people still need a roof over their heads in bad time and HDB is as far as one can downgrade. Then again if retrenchment becomes really bad, who can imagine what's going to happen. Just make sure you do not over-commit at an uncertain time like that. Ps buy withing your means..

Indeed you are the HDB resale guru and would like to seek your take on 3or4 room vs 5or larger room HDB only.

In recession times, we see alot of downgraders from bigger HDB flat to smaller HDB flat. In this economy gloom, it will continue to go south for this probably 2+years. Making the 3 or 4 room much more in demand vs the larger room.

Right now, we are facing similar situation in recession time like this and retrenchment likely to go up. Will you see that the 3/4 room price will rise while larger room price will flat or south? (esp in the west region)

From your personal view, how long will HDB price continue to go south once it's reach it's peak?

From the graph, it takes longer time to appreciates vs the price to dive. esp in the last decade.

I love to be called a guru but really, I'm no guru because I cannot answer many of your questions:

(1) How long will HDB price head south? I don't know. If this recession is really long like more than 1 year and retrenchment gets really bad, it may stay low for several years. If not, HDB price may not even fall. But from what I gathered, this recession is going to be long, maybe, very long.

(2) How much will the price dip? I don't know, but if there is massive retrenchment, then it can be worse than the last 97's financial crisis when price fell more than 10% per year

(3)What is going to be the peak RPI? I don't know. Definitely more than the last peak.

I can choose between purchasing a leasehold condo or a resale HDB. The objective is to live in it for a decent period of time i.e. 6 yrs etc. However, i am trying to "time" the market and would like to buy at the ideal "lowest point".I know the market for condos and hdbs differ quite a bit and i'd like to know your thoughts on a few thing:1) which will drop (%age drop) more first over the next few months? (hdb/condo)2) which will hit bottom first? hdb / condo?

and if you have any statistical /historical evidence that would help too!

At the moment we am renting a 5I HDb @ 2300pm. Considering the foll factors1. Condo prices are gg down2. HDB Resale is gg up.3. Cash flow(Repayment) for any debt will be maintained as atleast one of us will have a job (hopefully :) )4. Rates of Larger resale HDBs(5x, mansionette) almost converging to prices of resale condos. i.e.HDB gg up and Condos gg down.

Would it be prudent to invest in a Condo rather an HDB?I know this is not the stock market, but applying the mantra of buy low sell high ..

We plan on staying in the condo for atleast 4+ years and then possibly renting it out thereafter. We were more interested in the east side (close to the EW MRT line)

Dear DND,Whether a large HDB massionate or a much smaller condo is more desirable is really a personal preference. If you're an avid user of condo facilities like pool, tennis, etc; then condo would be great for you. However, I know of people who pay all that maintenance fee for condo facilities but would never use them, or worse still, have to moonlight to pay off the mortgage that they have no time at all to enjoy the facilities. Personally, I'd take a very pragmatic approach, pay for what really suits your needs.

I'd not make my choice based on the fact that HDB resale's price is going up and older condo's is going down. Actually, this fact merely shows which market segment stands up better against the current crisis. Besides you may also want to conside their prices on a $ per sq ft basis. To some people, space and more stable long-term appreciation is more important than lifestyle in which case they'd likely choose HDB for the same money. The difficult part is our priorities shift with age.

Your point (3) ended with a "hopefully" which gets me a little worry. This is no time to be overly-optimistic. Do be prudent with any huge financial commitment.

If you're buying an old 99 LH condo, you must understand that such property tends to be more difficult to sell esp during a downturn. You see, they are cheap not for nothing.

1. My husband and i are looking at some 5rooms houses. I still think the resale price value RPI is quite high. Should we wait a little longer? Will the RPI drop next year? early next year or at least gotta wait till mid year?

2. Currently my husband has a hbd with his parents, 3 names. we are planning to sell it so that we can get buy our own hdb nest. If we sell now, what are the best options to get for his parents as they are both retired. They can't support their own home with their cpf. We have thought of getting the retired studio but was advised by hdb that his parents can't get until 2 and half years after the sale of their hdb. Clueless how to handle the problem here. Pls advise. We want to give them their own nest as well but can't afford a condo. My husband is the only son.

3. Will houses in punggol appreciate more with the waterway coming in place? Currently the RPI in punggol is abt 420k for 5 rooms? Is it a good buy?

Very kind of you to call me "guru" but guru I'm not. Just a property market observer making my best guess about the future trends. So don't take everything I say as gospel truth. For that matter, don't believe the analysts, experts and whoever; trust your own judgement after you've heard from all sectors.

My guess:1. RPI will drop if there's massive unemployment but even then, I expect the drop not to be as large as the Asian financial crisis because of the genuine demand for HDB flats from new citizens and PRs.

2. If waiting for 2 and half year for a retiree's studio is not an option, then a small resale HDB would seem to be the choice.

3. I'd think so provided Spore becomes more prosperious but it's going to take time.

Really love your blog. It is an excellent and interesting platform for property-related discussion.

I just sold my 3rm flat and have put down a 1K deposit down for a EM in the East at $470K. I need to upgrade as I need more space for my growing family. After reading your comments, I am seriously reconsidering if I shld proceed or not. Don't want to be trapped with an overpriced unit in the upcoming years.

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The blogger here has been affectionately named by close allies as "Smart Buyer" but really, he's not smart. Smart Buyer just believes that being prudent is smart. That's the essence of the message of this blog and Smart Buyer hopes it'll benefit other property buyers.